- Company name
- Qualcomm
- Sector
- Semiconductors & wireless technology licensing
- About
- Qualcomm makes money two ways. The larger business, QCT, designs and sells Snapdragon chips: application processors and modems for smartphones, automotive infotainment and driver-assistance systems, chips for IoT devices, chips for Windows laptops, and, most recently, chips for AI data centers. The smaller business, QTL, licenses Qualcomm's patents on mobile technology such as 3G, 4G, and 5G. QTL charges device makers a royalty based on the wholesale price of the phone, whether or not that phone uses a Qualcomm chip, which makes it a high-margin, steady stream of profit. For years, most of Qualcomm's revenue came from smartphone chips sold to Android makers and to Apple. Qualcomm is now pushing to diversify: automotive chip revenue has grown by double digits every quarter for more than five years, and in December 2025 Qualcomm closed its $2.4 billion purchase of Alphawave Semi to gain the connectivity and compute building blocks for a new data-center AI chip line, the AI200 and AI250. Cristiano Amon is CEO. China, mostly through Chinese phone makers like Xiaomi, Oppo, and Vivo, made up about 46% of fiscal 2025 revenue.
- Thesis
- QCOM trades above the analysts' fair value because investors are paying now for an AI data-center chip business that has not yet earned revenue. The market is betting Qualcomm's new AI200 and AI250 chips, and deals like the one with Amazon Web Services, will succeed against rivals such as Nvidia and AMD. For the premium to be earned, this AI chip revenue must start showing up as management expects, beginning in the December 2026 quarter, and then keep growing. Automotive and Internet-of-Things chip sales must also keep offsetting the well-known decline in handset chip sales to Apple, whose own modem keeps replacing Qualcomm's chip. One old Apple risk has already eased. In September 2026 Qualcomm and Apple renewed Qualcomm's patent license, so Qualcomm keeps earning royalty income from Apple's phones even after Apple's modem fully replaces its chip. The core handset chip business is still shrinking today, and China's antitrust investigation into Qualcomm remains open. The next checkpoints are Qualcomm's fiscal Q4 2026 earnings report, expected near early November 2026, and the first reported AI chip revenue the quarter after. If AI chip revenue shows real traction over the next two to three quarters, the premium looks earned. If it stays at zero past December 2026, the premium is likely to fade.
- Risks
- Apple is replacing Qualcomm's modems with its own in-house chips. Qualcomm expects Apple-related product revenue to fall about 50% from fiscal Q3 to Q4 2026, its iPhone share to be "materially lower" than a prior 20% estimate, and its Apple business to end entirely by 2027.
Much of the stock's premium over fair value depends on data-center AI chips (AI200/AI250) and deals like the Amazon and Humain partnerships turning into real revenue. None of this has generated revenue yet; Qualcomm expects it to start only in the December 2026 quarter, against established competitors like Nvidia and AMD.
China, mostly through phone makers like Xiaomi, Oppo, and Vivo, made up about 46% of fiscal 2025 revenue. China's market regulator opened an antitrust investigation into Qualcomm in October 2025 over an undisclosed acquisition, adding regulatory risk in Qualcomm's largest market.
The core handset chip business is shrinking. QCT handset revenue fell 20% year-over-year in fiscal Q3 2026 on memory supply constraints, higher input costs, and softer demand from Chinese smartphone makers. Qualcomm said it would raise chip prices from September 1, 2026 to offset costs, which could pressure demand further.
The stock already trades about 16% above the analysts' fair value estimate, and the analysts rate the estimate's uncertainty "High." This leaves little cushion if the AI data-center or automotive growth stories disappoint.
Arm Holdings continues to contest its licensing dispute with Qualcomm despite losing in court in 2024 and again in September 2025. A separate Qualcomm lawsuit against Arm was set for trial in March 2026. Continued litigation could raise costs or create uncertainty around Qualcomm's Oryon CPU cores.
Qualcomm's new data-center push depends heavily on a small number of large customers, such as Amazon and Humain, echoing the customer-concentration risk it already has in smartphones.
- Recent events
- 2026-09-24: Qualcomm and Apple announced they renewed Qualcomm's global patent license agreement. The new deal starts April 1, 2027. It covers Qualcomm's wireless patents, separate from Qualcomm's chip supply deal with Apple, which is still shrinking.
2026-09-22: At its Snapdragon Summit, Qualcomm unveiled the Snapdragon 8 Elite Gen 6 and Snapdragon 8 Elite Extreme Gen 6 chips for premium Android phones, with new on-device AI features.
2026-09-08: Qualcomm and Amazon announced a partnership to build custom AI inference chips and optical networking for AWS data centers. Amazon's maximum contracted purchase is $60 billion over 10 years, and Qualcomm gave Amazon a warrant to buy about 25 million Qualcomm shares (roughly $4 billion) at $161.26 each. Qualcomm expects revenue from the deal to begin in the December 2026 quarter.
2026-07-29: Qualcomm reported fiscal Q3 2026 results: revenue of $9.9 billion, QCT revenue of $8.5 billion (handsets $5.1 billion, down 20% year-over-year; automotive $1.6 billion, up 61%; IoT $1.8 billion, up 9%), and QTL revenue of $1.3 billion. Non-GAAP EPS was $2.21; GAAP net income was $2.0 billion, down 25% year-over-year.
2026-07-29: Management guided fiscal Q4 2026 revenue to $9.7-$10.5 billion and non-GAAP EPS to $2.05-$2.25. It said Apple-related product revenue would fall about 50% from Q3 to Q4 as Apple's in-house modem ramps, with Qualcomm's iPhone share "materially lower" than a prior 20% estimate, and said China revenue likely bottomed in the June quarter.
2026-03-17: The board raised the quarterly dividend from $0.89 to $0.92 per share and approved a new $20 billion stock repurchase authorization, with no expiration date.
2026-01-20: Qualcomm unveiled the AI200 and AI250, its first purpose-built data-center AI inference chips, based on its Hexagon NPU. The AI200 is expected to be commercially available in 2026 and the AI250 in 2027.
2025-12-18: Qualcomm completed its $2.4 billion acquisition of Alphawave Semi, a UK chip-connectivity company, a quarter ahead of schedule. Alphawave's CEO, Tony Pialis, now leads Qualcomm's data-center business.
2025-10-27: Qualcomm and Saudi-backed Humain announced a deal for Humain to deploy 200 megawatts of Qualcomm AI200/AI250 rack-scale AI inference infrastructure, starting in 2026.
2025-10-10: China's market regulator (SAMR) opened an antitrust investigation into Qualcomm, saying the company failed to properly disclose its 2025 acquisition of Israeli chipmaker Autotalks as required under China's anti-monopoly law.